Obama: Congress has chance to stabilize economy

President Barack Obama said Congress has a "unique opportunity to do something big" and stabilize the U.S. economy for decades by cutting deficits at the same time it raises the national debt limit.

During a press conference on Friday, Obama warned that failure to meet the Aug. 2 deadline would mean "effectively a tax increase for everybody" if the government defaults, sending up interest rates.

He said he was ready to make tough decisions - such as on Medicare costs - and challenged Republicans to do the same.

"If they show me a serious plan I'm ready to move," he said.

The press conference comes after five days straight of meetings with congressional leaders failed to yield compromise, while credit agencies and the financial sector have issued increasingly urgent warnings about the risks of failing to raise the government's borrowing limit.

Leaders in Congress met with their parties on Friday morning behind closed doors to try to figure out what they'll support. Both parties discussed three plans to raise the debt ceiling.

The big deal: The plan the president wants would force both sides to make major compromises. It includes $4 trillion in deficit reductions, cuts to entitlement programs and tax increases.

Medium plan: A plan in which both sides give only a little includes roughly $1.5 trillion in cuts and no movement on entitlements or taxes.

McConnell plan: Senate Republican leader Mitch McConnell's idea is to allow the president the power to raise the debt ceiling so that Congress can vote against it a bunch of times. But the president doesn't want a short term fix.

"If we can't do the biggest deal possible, then let's still be ambitious. Let's still try to at least get a down payment on deficit reduction," Obama said.

Administration officials and private economists say that if the U.S. fails to raise its borrowing limit and begins to stop paying its bills as a result, the fragile U.S. economy could be cast into a crisis that would reverberate around the globe.

In a light moment on a day heavy with economic concern, Obama was asked why he still had hopes that the White House negotiations would provide any results, given the lack of success so far.

"I always have hope," he said with a smile. "Don't you remember my campaign?"